Insurtech, sizzling hot but still a mirage for China?

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InsurTech is suddenly a new buzz. We thought it should be under the category of Fintech, but apparently, insurance innovation would prefer a rather independent name, separated from banking sector somehow. Since 2011, it is estimated that Insurtech companies have raised a whopping USD 5.67 billion across 464 deals, which over half of them actually happened in the US. We heard western startup names in the news line with top deals like:

-Oscar Health, a New York based, health insurance company received USD400 million in Series C

-Clover Health, a San Francisco based, health insurance raised USD160 million in Series C

It seems American VCs have a thing for health insurance as it is a huge market and apparently needs a radical change. At the same time, insurance companies are also very enthusiastic in corporate ventures. Among them, XL group and AXA are probably the most glaring names behind some of the hottest Insurtech startups, for instance:

-Lemonade, a New York based, first startup that brings the notion of peer-to-peer payments to insurance, especially for home-owners and renters

-PolicyGenius, again a New York based startup provides users with price comparison information on life insurance, long-term disability insurance, renters insurance and pet insurance

If we cast our eyes onto the China, we are seeing a massively under-insured and a very traditional market. Life insurance accounts for nearly 70% of all insurance premium. Current online insurance penetration rate is hovering around 3% with an astonishing growth rate of online premium sales (estimated to be at least 20% annually). Inside China’s online insurance ecosystem, we have 4 typical players:

1)Traditional insurer under digital transformation

2) 3rd party insurance broker/agency

3) Online insurance innovator powered by internet giants

4) Online insurance startup

In general, online insurance territory is hard to crack for newcomers. Taking property&asset insurance as an example, in 2015, over 80% of its online sales of insurance premium, mostly related to auto insurance, were directly through traditional insurer’s official websites, dominated by two companies, PICC and PingAn Group.

If excluding auto insurance, then ZhongAn, China’s very first and most reputable online insurance innovator, took the lead in online property&assets insurance, with an estimated market share above 40%. But again we are talking about a baby co-created by Alibaba, Tencent and PingAn Group. It is indeed a baby born with a silver spoon and a lofty vision. That is why it can have more than 300 partners across a wide range of sectors such as bank, auto, e-commerce, travel etc, then can launch over 200 insurance products within short time span. For a humble startup, even in the US, this could only happen in their wildest fantasy.

Though we have startups trailblazing the health insurance, such as:

-Datebao, online brokerage for premium health insurance products at affordable price, raised USD20 million in Series B recently , with a valuation of USD 200 million

-Shuidihuzhu, a mutual aid and quasi-insurance platform that aggregates members who pay small fees, which contribute to a larger pool that promises certain payouts if a member is subject to critical disease or accident

The sentiments from the local experts often tend be negative, considering that these start-ups either deficient of resources for implementing product innovation or simply without a clear business model. China’s healthcare infrastructure is still immature and might have difficulty in supporting Datebao’s business model if it continues to scale. China regulator recently considered that Shuidihuzhu is operating in the gray area, not having the legal qualification of the insurance business and lacking corresponding risk control ability. The startup is now reviewing and modifying its product offering, community agreement and related provisions, trying to make a shift from insurance to social welfare.

In vivid contrast with the US, where Google, Facebook, Amazon are not that keen to dive into financial and insurance, Chinese internet giants have been aggressive in shaking things up in these sectors. The staggering size of China Insurtech market tease, torment and tantalize startups out there to grab the greenfield, but the question remains whether they will eventually end up as the underdog; or still the local internet giants exert their dominant influence in the arena fueled by their expansionary ambitions; or traditional insurers under accelerated digital transformation like PingAn can assert their substantial role in their old territory?

Cecilia Wu

A witty, nutty and frosty writer who hopes to jot down moments of inspiration from her daily life

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